Sometimes, mistakes seem perfectly avoidable in retrospect, such as taking out a jumbo adjustable rate mortgage on a way-overpriced piece of real estate. Other times, failure seems to sneak up from behind, such as the impeccably planned corporate merger that just never seems to click.

Either way, blaming errors in judgment on a lack of intelligence may be missing the point, according to the authors of Think Again: Why Good Leaders Make Bad Decisions and How To Keep It From Happening to You.¹ They say that our brains are hardwired to make decisions based on two built-in processes: pattern recognition and emotional tagging.

Pattern recognition is what allows us to go through the day without having to stop and think about every little decision. It’s how we almost intuitively navigate our way to the office, or anticipate how a tennis ball will bounce.

Emotional tagging refers to the way emotions are connected to memories. These emotional cues tell us what to pay attention to, what to ignore, and what sort of action we should take. They help us spot opportunities and run away from danger.

The authors point out that the brain generally does not follow the textbook sequence of events when making decisions: Lay out the options, define the objectives, and weigh each option against each objective. Instead, it analyzes the situation based on pattern recognition and decides whether to act based on emotional tagging. What’s more, the two processes happen almost instantaneously.

Red flags
Poor decisions are often a result of false pattern recognition and distorted emotional tags. The authors have identified three common ‘red flags’ to watch out for:

Presence of inappropriate self-interest. This could involve an obvious conflict of interest, or something much more subtle. And it needn’t be a malicious or even conscious phenomenon—even doctors are susceptible to ‘seeing what they want to see’ due to the influence of personal biases.

Presence of distorting attachments. We can become attached to people, places, and things in a way that distorts our judgment about them. Think of the business executive who is reluctant to close down a failing product line that they were instrumental in launching.

Presence of misleading memories. This occurs when we have memories that seem relevant and comparable to the current situation, when in fact there are important differences. We’re more likely to overlook these differences if our response to the previous situation was successful and created positive emotional tags.

Competing red flags can make it particularly difficult to arrive at good decisions when multiple parties are involved. The authors suggest systematically identifying the red flags of each decision maker, starting with the most influential person in the room. This makes it possible to implement appropriate safeguards.

What safeguards? One recommendation is to bring in an outsider who can expose key decision makers to new information or a different perspective. Another is to set up a balance of power so that biases may be explicitly confronted—either by fellow decision makers or by an impartial governance committee.

Our view
Red flags are virtually unavoidable, and it pays to uncover and examine them in an objective light. In our experience, contentious decisions or those that are a long time in the making tend to accumulate more ‘baggage’, and can benefit most from an objective third-party opinion. //